Over the last few years, Mexico has
made a series of policy decisions that
show its commitment to addressing
climate change. Mexico has been an
active participant in nearly all international climate change conferences and
conventions, and was the first developing country to establish emissions
reduction commitments after COP21.

There, Mexico set an ambitious target
of a 22 percent reduction of CO2 emissions by 2026.

Mexico’s renewable energy sector, which has grown rapidly over
the last decade, is attracting significant investments. Last year, 18 percent of the electric power generated
in Mexico was produced from renewable energy sources and the country
isn’t stopping there. Mexico’s ability
to achieve the ambitious goals it has
set for its contribution to combatting
climate change depends highly on
its ability to continue expanding its
renewable energy sector.

So what does the future of green
power look like in Mexico? The constitutional reforms of December
2013 and subsequent legal developments have redesigned the structure
and legal framework for the Mexican energy sector as a whole, including the electricity industry. The electric power sector now includes a
multiplicity of generation resources,
a wholesale electricity market with
open competition for power marketing companies, and an independent
system operator (ISO) in charge of
system dispatch and administration
of the power market. This represents
a paradigm shift for the entire industry and implementing these changes will be no minor task, considering
the importance of the energy sector
for the Mexican economy, its role as
the largest contributor to the federal budget, and the prominence of the
two state-owned companies, Pemex
and Comisión Federal de Electricid-ad (CFE), which operated as vertically integrated monopolies over oil, gas
and electricity for decades. Now, finding the right place for renewables in
the new Mexican electricity sector has
been a challenge, as there are many
pieces to fit into a changing puzzle.

Some of the incentives for renew-ables that the Mexican governmenthad already implemented under theprevious legal framework (includingaccelerated tax depreciation rates andfinancing programs) are still in play,but not all of them have been retainedin the new regime. Instead, the newstatutes provide for different incen-tives, mostly intended to:• Promote open access to trans-mission and distribution infra-structure, and allow an adequateinteraction of firm and intermit-tent power resources in the grid

Rogelio López-Velarde is a Mexico
City partner in
Dentons’ Energy
practice.